nep-gth New Economics Papers
on Game Theory
Issue of 2008‒10‒28
twelve papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. Endogenous Neighborhood Selection and the Attainment of Cooperation in a Spatial Prisoner’s Dilemma Game By Jason Barr; Troy Tassier
  2. Strong reciprocity and reputation management By Yamagishi, Toshio; Horita, Yutaka; Takagishi, Haruto
  3. Budget-Constrained Sequential Auctions with Incomplete Information By Carolyn Pitchik
  4. An Efficient Auction for Heterogeneous Discrete Goods When Preferences are Separable By Hakan Inal
  5. Dynamics of Intrahousehold Bargaining By Andaluz, Joaquín; Marcén, Miriam; Molina, José Alberto
  6. Simultaneous Signaling in Elimination Contests By Jun Zhang
  7. A Stability Index for Local Effectivity Functions By Joseph Abdou
  8. Dynamic Economic Game Theory and Asian Free Trade Agreements By James P. Gander
  9. Delayed Participation of Developing Countries to Climate Agreements: Should Action in the EU and US be Postponed? By Valentina Bosetti; Carlo Carraro; Massimo Tavoni
  10. Modelling Economic Impacts of Alternative International Climate Policy Architectures. A Quantitative and Comparative Assessment of Architectures for Agreement By Valentina Bosetti; Carlo Carraro; Alessandra Sgobbi; Massimo Tavoni
  11. The US-China Trade Conflict: A Game Theoretical Analysis By Hebatallah Ghoneim; Yasmine Reda
  12. Informational Hold-Up, Disclosure Policy, and Career Concerns on the Example of Open Source Software Development By Marc Blatter; Andras Niedermayer

  1. By: Jason Barr (Rutgers University, Newark, Department of Economics); Troy Tassier (Fordham University, Department of Economics)
    Abstract: There is a large literature in economics and elsewhere on the emergence and evolution of cooperation in the repeated Prisoner’s Dilemma. Recently this literature has expanded to include cooperation in spatial prisoner dilemma games where agents play only with local neighbors in a specified geography. In this paper we explore how the ability of agents to move and choose new locations and new neighbors influences the emergence of cooperation. First, we explore the dynamics of cooperation by investigating agent strategies that yield Markov transition probabilities. We show how different agent strategies yield different Markov chains which generate different asymptotic behaviors in regard to the attainment of cooperation. Second, we investigate how agent movement affects the attainment of cooperation in various spatial networks using agent based simulations.
    Keywords: repeated prisoner’s dilemma, cooperation, agent-based economics, endogenous networks, Markov chains
    JEL: C63 C72 C73 D8
    Date: 2008
  2. By: Yamagishi, Toshio; Horita, Yutaka; Takagishi, Haruto
    Abstract: Large scale cooperation among non-kin individuals is an evolutionary puzzle since it enhances other individuals’ fitness at a cost to oneself. One possible solution to this puzzle is evolution of strong reciprocity through group selection. Rejection choices of unfair offers in the ultimatum game has been considered a testimony to the operation of the social preferences of inequity aversion and reciprocity that underlie strong reciprocity. Across three studies using three different methodologies (strategy method, one-shot game, repeated one-shot game), we compared rejection behavior in the ultimatum, impunity, and private impunity games. Results showed that about 30-40% of responders who faced an unfair offer rejected it even when such behavior aggravated unfairness rather than reducing it (i.e., in the impunity and the private impunity games), though the rejection rates in these games were only about a half of that in the ultimatum game. It was also found, across three studies, that the rejection rate of unfair offers in the impunity game was about the same as that in the private impunity game, in which the responder’s decision was not informed to the propose
    Keywords: Reputation; Strong reciprocity
    JEL: C72
    Date: 2008–10–20
  3. By: Carolyn Pitchik
    Abstract: I study a budget-constrained, private-valuation, sealed-bid sequential auction with two incompletely-informed, risk-neutral bidders in which the valuations and income may be non-monotonic functions of a bidder's type. Multiple equilibrium symmetric bidding functions may exist that differ in allocation, efficiency and revenue. The sequence of sale affects the competition for a good and therefore also affects revenue and the prices of each good in a systematic way that depends on the relationship among the valuations and incomes of bidders. The sequence of sale may affect prices and revenue even when the number of bidders is large relative to the number of goods. If a particular good, say α, is allocated to a strong bidder independent of the sequence of sale, then auction revenue and the price of good α are higher when good α is sold first.
    Keywords: sequential auctions, budget constraints, efficiency, revenue, price, sequence
    JEL: C7 C72 L1
    Date: 2008–10–22
  4. By: Hakan Inal
    Abstract: An important question in auction theory is designing a dynamic efficient auction mechanism for multiple objects when bidders’ values are interdependent. Perry and Reny (REStud 2005) introduced an efficient auction for discrete homogeneous goods when bidders’ values are interdependent. In this paper, I propose an ascending auction mechanism for heterogeneous goods when bidders’ values are interdependent. I construct the auction mechanism by using a Perry and Reny auction mechanism for each type of good. I show that if agents' utility functions are additively separable in goods, quasilinear in money and agents’ budget constraints are not binding, then this auction mechanism has an efficient equilibrium outcome.
    Keywords: Auctions, Ausubel auction, heterogeneous goods auction, price adjustment, tatonnement.
    JEL: D44
    Date: 2008–04
  5. By: Andaluz, Joaquín (University of Zaragoza); Marcén, Miriam (University of Zaragoza); Molina, José Alberto (University of Zaragoza)
    Abstract: This paper studies the dynamics of bargaining in an intrahousehold context. To explore long-term partner relationships, we analyse bilateral bargaining by considering that spouses take decisions sequentially. We conclude that a greater valuation of the present, rather than the future, for the spouse who takes the second decision, increases the set of possible sustainable agreements, as well as the proportion of time that this agent devotes to a family good.
    Keywords: Stackelberg game, family bargaining, family good
    JEL: C71 C72 C62 J12
    Date: 2008–10
  6. By: Jun Zhang
    Abstract: This paper analyzes the signaling effect of bidding in a two-round elimination contest. Before the final round, bids in the preliminary round are revealed and act as signals of the contestants' private valuations. Depending on his valuation, a contestant may have an incentive to bluff or sandbag in the preliminary round in order to gain an advantage in the final round. I analyze this signaling effect and characterize the equilibrium in this game. Compared to the benchmark model, in which private valuations are revealed automatically before the final round and thus no signaling of bids takes place, I find that strong contestants bluff and weak contestants sandbag. In a separating equilibrium, bids in the preliminary round fully reveal the contestants' private valuations. However, this signaling effect makes the equilibrium bidding strategy in the preliminary round steeper for high valuations and flatter for low valuations compared to the benchmark model.
    Keywords: all-pay auction, elimination contests, incomplete, lottery, signaling
    JEL: C72 D44 D82
    Date: 2008–05
  7. By: Joseph Abdou (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole des Hautes Etudes en Sciences Sociales - Ecole Normale Supérieure de Paris - ENPC - Université Panthéon-Sorbonne - Paris I - INRA - CNRS)
    Abstract: We study the structure of unstable local effectivity functions defined for n players and p alternatives. A stability index based on the notion of cycle is introduced. In the particular case of simple games, the stability index is closely related to the Nakamura Number. In general it may be any integer between 2 and p. We prove that the stability index for maximal effectivity functions and for maximal local effectivity functions is either 2 or 3.
    Keywords: Effectivity function, local effectivity function, acyclicity, stability index, Nakamura Number, acyclicity.
    Date: 2008–07
  8. By: James P. Gander
    Abstract: The purpose of this paper is to use fairly standard game theory elements and apply them to free trade agreements (FTA) made within ASEAN countries and between ASEAN countries and outside countries and the rest of the world (ROW). The applications use some mathematics, but it is not my intent to burden unnecessarily the reader with the mathematics. My intent is to make the applications appeal to the practitioners who are directly or at least indirectly engaged in the process of making FTA’s and who are interested in a theoretical basis for FTA’s. The intent then could be described as being largely pedagogical. The main contribution of the paper is to show the structure and behavior of the backward solution method used in dynamic game theory.
    Keywords: Free Trade Agreements, ASEAN, Backward solution method
    Date: 2008
  9. By: Valentina Bosetti (Fondazione Eni Enrico Mattei and CMCC); Carlo Carraro (Fondazione Eni Enrico Mattei, University of Venice, CEPR, CESifo and CMCC); Massimo Tavoni (Fondazione Eni Enrico Mattei, Catholic University of Milan and CMCC)
    Abstract: This paper analyses the cost implications for climate policy in developed countries if developing countries are unwilling to adopt measures to reduce their own GHG emissions. First, we assume that a 450 CO2 (550 CO2e) ppmv stabilisation target is to be achieved and that Non Annex1 (NA1) countries decide to delay their GHG emission reductions by 30 years. What would be the cost difference between this scenario and a case in which both developed and developing countries start reducing their emissions at the same time? Then, we look at a scenario in which the timing of developing countries’ participation is uncertain and again we compute the costs of climate policy in developed and developing countries. We find that delayed participation of NA1 countries has a negative impact on climate policy costs. Economic inefficiencies can be as large as 10-25 TlnUSD. However, this additional cost wanes when developing countries are allowed to trade emission reductions from their baseline emission paths during the 30-year delay period. Thus, irrespective of whether NA1 countries are immediately assigned an emission reduction target or not, they should nonetheless be included in a global carbon market. Technology deployment is also affected by the timing of developing countries’ mitigation measures. Delayed NA1-country participation in a climate agreement would scale down the deployment of coal with CCS throughout the century. On the other hand, innovation in the form of energy R&D investments would be positively affected, since it would become crucial in developed countries. Finally, uncertainty about the timing of NA1-country participation does not modify the optimal abatement strategy for developed countries and does not alter policy costs as long as a global carbon market is in place.
    Keywords: Delayed Action, Climate Policy, Stabilisation Costs, Uncertain Participation
    JEL: C72 H23 Q25 Q28
    Date: 2008–09
  10. By: Valentina Bosetti (Fondazione Eni Enrico Mattei and CMCC); Carlo Carraro (Fondazione Eni Enrico Mattei, University of Venice, CEPR, CESifo and CMCC); Alessandra Sgobbi (Fondazione Eni Enrico Mattei and CMCC); Massimo Tavoni (Fondazione Eni Enrico Mattei, Catholic University of Milan and CMCC)
    Abstract: This paper provides a quantitative comparison of the main architectures for an agreement on climate policy. Possible successors to the Kyoto protocol are assessed according to four criteria: economic efficiency; environmental effectiveness; distributional implications; and their political acceptability which is measured in terms of feasibility and enforceability. The ultimate aim is to derive useful information for designing a future agreement on climate change control.
    Keywords: Climate Policy, Integrated Modelling, International Agreements
    JEL: C72 H23 Q25 Q28
    Date: 2008–10
  11. By: Hebatallah Ghoneim (Faculty of Management Technology, The German University in Cairo); Yasmine Reda (Faculty of Management Technology, The German University in Cairo)
    Abstract: Game Theory has been gaining great importance in Economics, encouraging research in many theoretical and applied fields. This paper relies on simple game theory tools to set up a major international trade dispute. Using the backward deduction approach, the strategies of the United States and China in their recent trade conflict are analyzed.
    Keywords: Trade Conflict, Exchange Rate Policy, Game Theory
    JEL: F51 C7
    Date: 2008–10
  12. By: Marc Blatter (Economics Department, University of Bern); Andras Niedermayer (Kellogg School of Management, CMS-EMS, Northwestern University)
    Abstract: We consider software developers who can either work on an open source project or on a closed source project. The former provides a publicly available signal about their talent, whereas the latter provides a signal only observed by their employer. We show that a talented employee may initially prefer a less paying job as an open source developer to commercial closed source projects, because a publicly available signal gives him a better bargaining position when renegotiating wages with his employer after the signal has been revealed. Also, we derive conditions under which two effects suggested by standard intuition are reversed: a “pooling equilibrium” (with both talented and untalented workers doing closed source) is less likely if differences in talent are large; a highly visible open source job leads to more effort in a career concerns setup. The former effect is because a higher productivity of talented workers raises not only the value but also the cost of signaling; the latter stems from more effort and the choice of a high visibility job being substitutes for the purpose of signaling. Results naturally apply to other industries with high and low visibility jobs, e.g. academic rather than commercial research, consulting rather than management.
    Keywords: Open source software, signaling
    JEL: C70 L86
    Date: 2008–09

This nep-gth issue is ©2008 by Laszlo A. Koczy. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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